The NFC Report: What’s the business case for NFC in banking?

Financial services analyst Celent predicted last month that a rollout of NFC across the US would see financial institutions gaining extra revenues of just $1.83 per customer per year. Could that be true?

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Celent’s figures are based on the premise that US consumers would replace 30% ($151 on average) of their current cash spending with NFC and that this would, in turn, generate an average revenue increase for card issuers of US$1.83 per debit card account per year. “In developed countries, this is mainly due to the fact that payment brands and banks have already done an excellent job of growing plastic card usage, and there is relatively little cash left to be realistically displaced,” say the analysts.

Whilst the full business case for NFC in the banking sector is still evolving, the potential of NFC is, we believe, far wider than simply displacing a bit of cash.

For The NFC Report, we’re gathering together all the ways that have been identified so far for financial institutions to leverage NFC to generate additional revenues. Two areas that seem particularly strong to us are the provision of budgeting software to give consumers an improved service — and an incentive to use their NFC phone more frequently — and the potential for banks to take on the role of trusted service manager for their merchants’ marketing programmes:

Banks as Trusted Service Managers. Through their merchant service arms, most banks already have established retail relationships — something which mobile operators do not. Could banks take on the trusted service manager role for their merchants, helping retailers, brands, entertainment venues and others to deliver mobile loyalty, promotion and marketing services via a value-add to their existing merchant agreements?

Combining payments and budgeting software. Here, consumers could be offered an NFC service by their bank that includes both the means to make payments from all of their accounts and budgeting software that makes it easy to analyse all their spending, business and personal. Could this be enough to provide consumers with the incentive to use their phone for as much of their spending as possible and provide an incentive for merchants to invest in contactless points-of-sale? And, beyond that, the ‘intelligent wallet’ aspect of NFC offers the potential to incorporate proof-of-purchase, receipts, guarantee and warranty entitlement, audit trails and expenses functionality.

If you are working on a value-adding product or service aimed at banks, or you’ve been involved in analysing NFC in financial services and would like to share your findings, please do get in touch. We’ll be publishing the business case for NFC in financial services section of The NFC Report in a few weeks time and we’re keen to ensure we include all the possible new revenue streams available…

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